Free Porn Threatens Adult Film Industry

June 11, 2007

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"There must be 50,000 affiliates out there," explains Yagielowicz. "They get free content, usually free hosted galleries or 15-second teaser clips, from Vivid or another big company and post it on their site. And if someone likes that gallery and they click through and join the Vivid Web site, the affiliate gets a cut."

And some in the industry are borrowing methods from Wall Street. Francis Koenig, who once ran the New World Partners hedge fund, launched AdultVest last year. The hedge fund specializes in matching investors with adult entertainment companies. "We are making a market where there was none before," says Alan Ramer, the fund's director of business development.

Investors who qualify (earn an annual income of $200,000 a year, have a combined household income of $350,000 a year and have a net worth of $1 million) can put their money into several funds. The Libor Fund, which launches next month, will specialize in financing adult clubs. "This is a new model -- to promote a market in the adult industry that wasn't there before."

Porn has almost always been at the forefront of technology, adopting video, DVDs, the Internet, e-commerce, online payment, and digital TV long before the mainstream entertainment world. But as the supply of X-rated content keeps increasing, the demand for free and inexpensive porn will keep growing, rendering the industry less able to charge for its products.

One technology that some in the industry are banking on is mobile cybersex, pornographic clips to be viewed on cellphones. Industry estimates project the U.S. market will reach between $500 million and $1.5 billion by 2009.

And researchers have noted that the increased privacy of cell phones compared to computers could benefit the popularity of adult content.

"Anecdotally, we have observed that users often consider their cell phone as a very personal and private device; perhaps even moreso than their computer -- the probability of others discovering their search behavior (through cached pages, auto-completion of query terms or URLs) is smaller," wrote Maryam Kamvar and Shumeet Baluja, computer science professors affiliated with Google.

But many industry veterans don't hold out much hope for mobile cybersex, arguing that the screen is too small and that major carriers are unwilling to carry adult content.

Hustler's Rosenfeld is also skeptical. Although he says he was just given an order to start creating content for mobile phones, he doesn't believe it will be profitable any time soon. "None of that is being broadcast in the U.S. and it's only softcore right now — naked girls dancing," he says. "The big carriers here aren't willing to broadcast that kind of content."